He believes three things will aid the performance of loan growth in FY18. First, waning credit substitution as banks effectively price as per the MCLR curve; second, continued growth momentum in retail, aided by declining product rates and a modicum of revival in corporate credit on higher inflationary expectations and lastly, improved utilisation of industrial capacity.

ICRA, in its report said, "Declining interest rates, driven by demonetisation, will prompt existing bank borrowers to shift from base rate system to the new MCLR mechanism as it will help them reduce repayment cost."

Crisil Research said, “We expects bank credit growth to remain muted at 8-10% in fiscal 2018, led by low industrial capital expenditure and continued refinancing through bond markets. Retail sector growth will continue to show higher growth as consumption demand gradually picks up and cost of borrowing falls.”